4.6.2.3. Non-Compensable (Consequential) Damages.Because the compensability of a particular aspect of damage stems from its treatment in the open market between willing buyers and sellers, losses that are not reflected in sales prices in the private market cannot be considered in federal acquisitions. Applying this principle, federal courts have determined that the following losses are not compensable under the Fifth Amendment: loss of business value or going concern value;783 loss of or damage to goodwill;784 future loss of profits;785 frustration of plans;786 frustration of contract or contractual expectations;787 loss of opportunity or business prospect;788 frustration of an enterprise;789 loss of customers;790 expenses of moving removable fixtures and personal property;791 depreciation in value of furniture and removable equipment;792 increased production or management costs;793 damage to inventory or equipment;794 expense of adjusting or restructuring manufacturing operations;795 incurrence of removal or relocation costs;796 loss or cancellation of revocable permits or licenses;797 loss of ability to collect assessments;798 uncertainty premium due to tenant’s status as a government entity;799 and interference with development agreements,800 among others. 801 Such losses must be disregarded—even if proved—because by law, they are not compensable under the Fifth Amendment. 

Acquisitions of Fee or Other Full-Term Interests.Under federal law, compensation for a fee acquisition does not include “future loss of profits, the expense of moving removable fixtures and personal property from the premises, the loss of good-will which inheres in the location of the land, or other like consequential losses which would ensue the sale of the property to someone other than the sovereign.”802 The Supreme Court explained the reasons for this rule as follows: 

Whatever of property the citizen has the government may take. When it takes the property, that is, the fee, the lease, whatever he may own, terminating altogether his interest, under the established law it must pay him for what is taken, not more; and he must stand whatever indirect or remote injuries are properly comprehended within the meaning of “consequential damage” as that conception has been defined in such cases. Even so the consequences often are harsh. For these whatever remedy may exist lies with Congress.803 

While beyond the scope of the appraiser’s assignment, Congress has enacted remedies: people and businesses affected by federal acquisitions receive replacement housing, moving expenses, and relocation services under the Uniform Act.804 Similarly, Congress authorized administrative payments for losses due to the cancellation of federal grazing permits for war purposes.805 Administrative benefits under the Uniform Act or other statutes are separate from compensation under the Fifth Amendment (and again, beyond the scope of the appraiser’s assignment to develop an opinion of market value for a federal acquisition).806 

Temporary Acquisitions.The rules above apply with equal force to temporary acquisitions (Section 4.7) that acquire or terminate the full remaining term, because in such situations a “lessee would have to move at the end of his term unless the lease was renewed” regardless of the federal acquisition.807 “The compensation for the value of his leasehold covers the loss from the premature termination . . . .”808 As a result, the Supreme Court held, when there is an acquisition of an entire property interest, “whether that property represents the interest in a leasehold or a fee, the expenses of removal or of relocation are not to be included in valuing what is taken.” 809 

Temporary Acquisitions Interrupting a Longer Term.The valuation of a temporary acquisition that interrupts but does not terminate a longer interest—such as a sublet for less than the outstanding term of an existing leasehold—may involve a nuanced refinement of the rule stated above. 810 As a result, the market value of this type of temporary interest may need to reflect reasonable costs for tenant relocation, preparing the space for the new occupant, and storage of goods pending the displaced tenant’s return.811 Such items may be considered “not as independent items of damage but to aid in the determination of what would be the usual—the market—price which would be asked and paid for such temporary occupancy of the building then in use under a long term lease.”812 

The Supreme Court has emphasized that consideration of reasonable relocation costs in temporary interrupting acquisitions does not “depart from the settled rule against allowance for ‘consequential losses’ in federal condemnation proceedings.”813 Rather, relocation costs may be relevant to the market value of a temporary interrupting acquisition of less than the outstanding term—such as a sublet of an occupied building—and therefore compensable and appropriate to consider in such acquisitions. But relocation costs are merely incidental to the value of an acquisition of the entire interest (whether temporary or permanent) and therefore must be disregarded in acquisitions of the entire interest.814 In short, as the Seventh Circuit stated, “if the Government takes over only a portion of a lease, then the cost of removal may be considered in determination of just compensation” but if it acquires “the entire lease, such consequential losses are not to be considered.”815 The reasons for this distinction can be found in United States v. Petty Motor Co.: 

There is a fundamental difference between the taking of a part of a lease and the taking of the whole lease. That difference is that the lessee must return to the leasehold at the end of the Government’s use or at least the responsibility for the period of the lease, which is not taken, rests upon the lessee. . . . Because of that continuing obligation in all takings of temporary occupancy of leaseholds, the value of the rights of the lessees, which are taken, may be affected by evidence of the cost of temporary removal.816 

Exceptions.Federal courts have recognized rare exceptions to the foregoing rules, allowing normally non-compensable damage to be reflected in unusual circumstances, such as the temporary acquisition of a business property or a partial acquisition with the effect of a total taking.817 Such exceptions always require legal instruction.161